The worlds of professional sports and gambling have become increasingly intertwined. Partnerships between major sports leagues and large gambling companies are now commonplace. You can hardly watch a game without seeing an advertisement for a daily fantasy site or a sports betting app. While this collaboration presents massive financial opportunities, it also opens the door to significant risks, including fraud and corruption.
This rapid integration has outpaced regulatory oversight, creating an environment where conflicts of interest can flourish. For fans, businesses, and the leagues themselves, understanding these risks is the first step toward protecting the integrity of the game. We’ll explore the growing problem, why it’s happening, and what lessons businesses can learn to protect themselves from similar threats.
The High-Stakes Partnership
The financial incentive for sports leagues and gambling companies to partner is undeniable. The sports betting industry is one of the largest and fastest-growing sectors in the country. For the leagues, this means a new, lucrative revenue stream. For the gambling companies, it means direct access to a massive, engaged audience of sports fans.
This synergy seems like a win-win. More fans watching games can lead to more potential customers for betting platforms. The legalization of sports gambling across many states has removed previous barriers, making it easier than ever for fans to place bets on their favorite teams and players. What used to require finding an illegal bookie can now be done with a few taps on a smartphone.
However, this explosion in accessibility and cash flow has created a perfect storm for potential misconduct. With billions of dollars at stake, the pressure to win—both on the field and on the betting slip—has never been higher.
A Regulatory Vacuum
In many other industries, from pharmaceuticals to finance, federal agencies exist to protect consumers from being taken advantage of. These regulatory bodies ensure that companies operate ethically and that their products are safe. For example, the Food and Drug Administration (FDA) regulates medicine to ensure it doesn’t harm customers.
Currently, the partnership between professional sports and gambling lacks this level of robust federal oversight. While individual states have their own rules, there isn’t a unified national framework dedicated to monitoring these relationships and protecting the average fan. This absence of regulation creates opportunities for bad actors to exploit the system. Without a strong watchdog, the responsibility falls on the leagues and companies themselves, whose financial interests may conflict with the need for strict enforcement.
The Fraud Triangle in Action
Forensic accountants often use a concept called the “fraud triangle” to understand why people commit fraud. It consists of three elements:
- Opportunity: The circumstances that allow fraud to occur.
- Pressure (or Incentive): The motivation or reason for committing fraud.
- Rationalization: The justification the person uses to make their actions seem acceptable.
The current sports gambling landscape provides fertile ground for all three components. Players, coaches, and other insiders have access to private information that the general public does not. This creates the opportunity to influence or profit from bets. The pressure can come from many sources, including personal financial struggles, external influences, or the simple desire for more money.
Rationalization can be as simple as an employee thinking, "The league and the team owners are making billions; they won’t miss this small amount." This thinking allows small, unethical actions to escalate over time.
We are already seeing the consequences. Reports have surfaced of players providing inside information to friends to help them win bets. In other cases, players have been accused of manipulating their own in-game statistics to ensure a specific "prop bet" pays out. This is a form of match-fixing that directly harms the consumer who believes they are betting on a fair contest. When outcomes can be influenced by hidden information, the average person on their couch is at a distinct disadvantage.
Lessons for Every Business Owner
While not every business is a multi-billion dollar sports franchise, the principles of fraud prevention are universal. The issues seen in the sports world offer valuable lessons for businesses of any size.
The Importance of Proactive Oversight
Fraud often happens when no one is watching. For a small business owner juggling countless responsibilities, it’s easy to let things like financial monitoring slip. However, taking the time to periodically review your operations is crucial.
You must stop and intentionally look at your processes. Where is money flowing in and out of your business? Who has access to company funds? Simple check-ins can reveal vulnerabilities before they become major problems.
Implement Strong Internal Controls
One of the most common mistakes is giving one person, other than the owner, sole control over the company’s finances. This creates a significant opportunity for misappropriation of assets. To prevent this, consider implementing controls such as:
- Separation of Duties: Ensure that the person who approves payments is not the same person who writes the checks or initiates transfers.
- Access Management: Limit who has access to company bank accounts, credit cards, and checkbooks. Regularly review these access lists.
- Regular Audits: Conduct periodic, unannounced checks of inventory, cash on hand, and financial records. This doesn’t have to be a formal audit; even a simple monthly review can deter potential fraud.
A real-world example from our files involved a jewelry store. The employee running the repair center was left largely unsupervised. Over 18 months, he stole over a million dollars in jewelry left by customers for repair. He would assume customers had forgotten about items left for a long time, melt them down, and pocket the cash. A simple, regular inventory check would have uncovered the scheme much earlier and saved the business a significant loss.
Understand the “Slippery Slope”
Fraud rarely starts with a grand, elaborate scheme. It often begins with a small, seemingly insignificant act. An employee might use the company credit card for a small personal purchase, intending to pay it back. When they get away with it, the temptation to do it again—and for a larger amount—grows. This is how small indiscretions spiral into major financial crimes.
The employee at the jewelry store felt he deserved more money and rationalized that the profitable business wouldn’t miss a few items. That initial thought process, combined with the opportunity, led to a massive theft. By fostering a culture of accountability and making it clear that all financial policies are enforced, you can stop this slippery slope before it begins.
Protecting Your Organization
The growing relationship between sports and gambling serves as a high-profile reminder that where there is a lot of money and a lack of oversight, the risk of fraud is high. Whether you run a sports league or a local shop, the core principles of prevention remain the same.
Be proactive, implement strong internal controls, and never underestimate the importance of oversight. By taking intentional steps to monitor your operations and manage who has control over your finances, you can protect your business, your employees, and your customers from the damaging consequences of fraud.